- The Iranian government is willing to try Bitcoin as an alternative store of value
- Iran had originally banned cryptocurrencies in 2018
- This could be a turning point in Iran’s economic situation
Cryptocurrencies and blockchain have become buzzwords in Iran with several high-profile projects currently happening. The government and private sector are clasping hands to give cryptocurrencies the space it needs to save the country’s lucrative but fledgling tourism industry.
Iran has joined the list of troubled economies to embrace cryptocurrencies as an alternative, thanks to the decision by U.S. President Donald Trump to unilaterally pull out of a nuclear deal that was signed by his predecessor, according to a report in the local al-monitor publication. The devaluation of the Iranian rial courtesy of the U.S.-led sanctions and poor management has made the country a cheap tourist destination and caused an influx of tourists, who now need an alternative currency as the rial has lost over 60 percent of its value from 2018.
Iran enacted a total ban on cryptocurrencies in April 2018 but now appears to have a change of mind and are not only willing to accept it but promote its use as well. There are an estimated 50 or so blockchain ventures going on in the country besides numerous cryptocurrency mining operations and crypto exchanges. Yaya Fanusie of the Washington-based Foundation for Defense of Democracies was recently quoted by The Hill publication saying:
“Central Bank of Iran or CBI is Encouraging experimentation, funding some blockchain startups directly and even recently drafting legislation that allows crypto-currency mining and trading.”
Sanctions-breaking store of value
In late January this year, the government granted preliminary approval for the creation of an Iranian gold-backed cryptocurrency to be known as Paymon or Peyman and four banks were signed on with a schedule to start circulating it later this year. However, there is ambiguity as far as the use of cryptocurrency such as Bitcoin is concerned. It may appear therefore that Iran is embracing Bitcoin not necessarily out of its technical curiosity but out of economic necessity as a sanctions-breaking store of value, something that the Mayor of Chicago said recently, as reported by BR.
Iran’s 80 million citizens are facing tough economic times, runaway inflation and the country is feeling a deep void in its tourism sector as a result of decades of sanctions. This means that tourists are forced to use cash to pay for everything since they cannot access any other international payment method.
Locals and tourists are now forced to buy gold or acquire vast amounts of Bitcoin with the government estimating that the total amount spent on cryptocurrencies in Iran going over $2.5 billion or more. Should the government succeed in tapping into this existing potential, it could prove to be a turning point for the country’s underdeveloped tourism sector and become the source of some much-needed hard currency.